Gold is gaining momentum heading into the weekend, driven by increased demand for safe-haven assets due to growing geopolitical instability in the Middle East, which is overshadowing strong labor market data.

Gold initially faced selling pressure on Friday morning after the Bureau of Labor Statistics reported that the U.S. economy added 254,000 jobs last month, beating expectations for a 147,000 increase in nonfarm payrolls for September. Additionally, wages rose 0.4%, beating expectations.

Prior to this data, markets had priced in a 30% chance of a 50bp rate cut by the Fed next month. However, those expectations have now evaporated. Despite the strength of the US dollar due to the change in monetary policy expectations, gold has managed to hold its ground.

December gold futures last traded at $2,669.10 an ounce, broadly flat compared to last week.

Analysts point out that geopolitical instability is currently overshadowing economic data.

“Gold is holding strong for one main reason: the risk of a weekend event in the Middle East,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, noted that while geopolitical tensions generally support gold, the current heightened anxiety is leading to increased bull market volatility.

The situation in the Middle East continues to escalate, with Israel embroiled in conflicts with Hamas in Gaza and Hezbollah in Lebanon, raising concerns that Iran may become more involved.

Iran, Hezbollah’s primary backer, has provided the group with weapons and financial support over the years. Earlier this week, Iran fired 180 ballistic missiles at Israel, all of which were intercepted.

The world community is now waiting to see how Israel will respond to Iran.

“Nobody wants to be short on gold heading into the weekend,” Colombo commented.

Looking ahead to a relatively light economic calendar for the coming week, Lukman Otunuga, Director of Market Analysis, noted that gold will be impacted by a strong economic outlook and ongoing turmoil in the Middle East.

Technically, gold remains rangebound on the daily charts, with support at $2,630 and resistance at $2,675, he said. A break of the pattern could be imminent, with upcoming events acting as catalysts, ranging from ongoing geopolitical tensions to key U.S. data, including the CPI and speeches from several federal officials.

While gold remains below $2,700 an ounce, Colombo stressed that continued buying on dips indicates a strong bull market for gold.

He added that, along with rising geopolitical instability and the Fed’s new easing cycle, increased global liquidity makes gold an attractive option. Gold remains attractive as a cash asset amid growing global debt.

“There is no single factor driving this market, which is why this rally has been so unstoppable,” he explained. “A lot of people thought it was technically overdone and expected a 5% or 10% pullback, but all the price did was trade sideways. That, to me, is a very bullish sign.”

Although markets have discounted a 50 basis point cut next month, analysts say the Fed's overall monetary policy stance remains supportive of gold.

“The Fed is likely to maintain its general stance of cutting rates until they reach close to 3%. That should support gold,” David Morrison, senior market analyst at Trade Nation, told Kitco News. “The important thing is that it doesn’t matter whether the Fed cuts for positive reasons (because inflation is under control) or negative reasons (because the economy is heading toward recession); gold should remain desirable until the current bull market is over.”

Even with the relatively light economic calendar next week, the US CPI for September is the big event. Economists suggest markets will be keen to see if inflation pressures continue to ease, which would support the Federal Reserve’s easing cycle.

Markets will also get the minutes of the Federal Reserve's latest monetary policy meeting.

Upcoming economic data:

Wednesday: Minutes of the September FOMC Meeting

Thursday: Unemployment claims

Friday: US Producer Price Index, University of Michigan Preliminary Consumer Confidence Index